Real estate saving a great retirement tool

The phrase “as safe as house” continues to be a great retirement saving option in Indian real estate. There are three factors that support real estate as saving option for retirement. First is housing shortage in India, second tax regimes and last favorable demographics that make borrowing to buy a house easier. While for a large section of population this is clearly not an option as the realty prices are too steep. However for people with good cash flow and enough savings buying house is comparatively easier. The Lehman brother crises recently in 2008 and before that correction in property prices in late nineties raised lot of doubts in minds of people but majority of financial planners still support real estate as a tool for retirement. Buying a house should be a top priority for people who do not own a house yet. There are number of factors like capital appreciation, cash flow and tax bracket that would tempt the homeowners who are in high tax bracket to look for a second home. A second house in which you don’t live, the notional rent that you earn is taxable. Most of the people take loan to buy house and then they rent out the place.

Commercial realty remained sluggish in the first quarter

The leasing and buying in the commercial real estate market remained sluggish in India for the first quarter which ended on March 31 of the calendar year 2012. The total absorption of the office space was reduced by 12% when compared to the last quarter of the previous year. According to a report by DTZ India, a real estate consultant several factors led to such reduction which included inter alia weak domestic macro-economic indicators, cautious sentiments among Indian corporate and financial institutions. Also another factor which probably was responsible was that there was no change in the interest rates by RBI in the last quarter which restricted the companies from buying due to the anticipations of a fall in rates in the future. During this quarter the demand was highest in Bangalore, which was followed by Mumbai. However supply always surpassed the demand in the first quarter too, wherein around 5.9 million square feet of office space was added to leading cities across the country. Such supply was majorly experienced in cities like Bangalore, Delhi-NCR, Mumbai and Chennai. However in the coming quarters there are hopes of some positive news for the commercial real estate sector of the country which could perhaps result as an increase in demand from the MNC’s.

Local real estate developers to gain an edge in the local market

It has been seen through the medium of extensive reports that the larger real estate developers were relatively unsuccessful in tapping over the tier-II and III markets in Gujarat whereas the local developers are doing great business in such markets especially in cities like Surat, Ahmadabad and Vadodara. These local developers have been doing as much as possible to have an edge over their national counterparts such as increasing more transparency and enhancing product portfolio. According to an Ahmedabad based real estate developer, Mr. Suresh Patel, Director, Surya Group the economic slowdown has comparatively insulated the local developers more than the large developers and helped them to expand in the tier-II and III cities of Gujarat. He also added that with the increase f professionalism in the city, they are able to expand in other cities within and outside the state. It is also a belief that local developers have an edge over the national and much larger counterparts when it comes to understanding the geographies of the local area and need of the local people. Also there has been much diversity in these areas which has led to the success of the local developers. Gujarat is comparatively versatile than other industrial states, hence the slowdown in one particular sector doesn’t lessens the demand for residential or commercial properties in the city.

Realtors adding designer touch to projects

Big designers are now emerging as the trend setters for the real estate industry as well. The realtors are hiring the well known real estate designers who add marvelous and glossy features to the housing projects enhancing the look and feel of the units. Various fashion brands as well as individual designers are endorsing the realty projects which are reflecting the modern lifestyles of the upper class that are willing to shell out the extra premium for better looks and comfort. Panchsheel realty has tied up with a company called “yoo”, an interior designer firm founded by Phillipe Starck, for its Pune project in Kharadi. These units are of 5110-6900 sq ft. which are priced at Rs. 15,000 per sq ft. A Pune based, Amit Enterprises has tied up with Sachin Tendulkar as a brand ambassador for its residential project in Ambegaon. Sachin is not however designing the units which are 846 in total. Actresses too these days are tying up with developers for the designing work, as Gauri Khan is roped in for this project in Pune. Many factors are leading to an all time high demand for such designer homes which includes higher aspirations, modern and sophisticated lifestyles. The demand as so high that sometimes people don’t even consider before spending twice on a designer project where an ordinary unit can be availed of half the price.

DLF shares fall after removal from BSE sensex

After the Bombay Stock Exchange decided to replace the India’s biggest real estate company, DLF in the India’s benchmark 30 share index with the pharmaceutical major company, Dr. Reddy’s Laboratories, it’s shares are said to have fallen by 2.5 percent. The company is said to have experience a big eroding in the sense that its market value has fallen by 84% to $6.4 billion as compared to the peak which was over $38.4 billion in early 2008. According to a company’s spokesperson, the replacement of DLF stock in BSE index is primarily due to low floating stocks, as DLF has high promoter group holding of 79 percent leading to comparatively low free float. This removal of DLF from the index which would take effect from June 11 , also raises another effects as it may result into problems such as declining profits among the real estate companies in India which are suffering with high debt, slow sales and thereby slow growth. According to an analyst at Ambit Capital, the real estate sector has faced a huge de-rating from investors in the share market as they as becoming skeptical about the transparency and accounting policies of the companies. After DLF exit from the BSE index there would be no real estate stock on the index.

Blue Mountain denies deal of 42 UK hotels

According to a report published in The Times, London, Blue Mountain Real Estate Advisors (BMREA), an Indian property investor has been chosen as the preferred bidder for the 42 Marriott hotels across Britain after the firm had offered 750 million pounds. The report further stated that the company collapsed under the heavy burden of about 900 million pounds most of which was due to Royal Bank of Scotland (RBS). Mr. Janak Vaswani, director, BMREA had completely denies all this and said that his company has nothing to do with the 42 UK hotels and his company has not made any sort of offer. In a statement Mr. Vaswani said that he was hearing about such a deal for the very first time himself and has nothing to do with this transaction at all. He also said that he is not familiar with any other company by the same name. Meanwhile RBS could not be reached for comments on this deal. The assets on this offer comprises of about 8000 rooms in 42 hotels in England, Wales and Scotland. All these hotels are operated by Marriott International under a 30 year management agreement that took place in 2006. These hotels have remained in news for much time now as earlier in February, 2012 they were in the buzz for participation of many companies in the bidding.

CREDAI demands simplified procedures and reforms in the real estate norms

According to Mr. Lalit Jain, national president of Confederation of Real Estate Developers Association of India (CREDAI), the way to increase the construction of houses and buildings in the Indian market is to simplify the procedures and the introduction of reforms in the taxation and banking policies of the government. The association has also decided to make a representation to the central government on this issue as it is really bothering them much. A press release from the confederation clearly states that the governing council of the industry body will follow up on its own representation and within 45 days will decide on its own course of action, including going on a strike. Mr. Jain while addressing the annual governing council in Pune further stated that such reform are required to encourage the construction business. The government and the private sector shall go hand in hand for the purpose of meeting the demand for housing which is facing much shortage in the country. The major issues which need to be fixed by the government by introducing major reforms according to CREDAI are delays in project clearances, high land costs, and high rates of taxation and shortage of funds. These factors together contribute in increasing the construction cost which ultimately affects the buyer.

Real estate sector shows growth in Bangalore

The real estate sector has witnessed high growths in Bangalore in the last year. The Karnataka chapter of Confederation of Real Estate Developers Association of India (CREDAI) anticipates that the sector would further expected to grow by 25% by the end of this year. Mr. Sushil Mantri, President, CREDAI Karnataka said that they are expecting the realty market to grow by 25 percent in the coming year and he also added that last year they had witnessed the same growth. According to the studies conducted in the city, the demand for the office space is even more than the supply being 7 million sq. ft. While the demand for office and commercial space is witnessing an increase over time, the demands for residential space remained slow. According to some experts the city saw a great increase in the high street leasing and rent and thereby there was a hike in the rental value as the demand by retailers remained strong throughout the year. A report by Jones Lang LaSalle, a realty intelligence firm stated that FDI in multibrand real estate is expected to catalyse a lot of demand from international retailers. International luxury brands would restrict their business to Mumbai, Delhi and Bangalore.